Monica Prasad and her politically correct nonsense in the New York Times

March 3, 2013

I haven’t read Monica Prasad’s book “The Land of Too Much: American Abundance and the Paradox of Poverty” but I’m sure not impressed with her promotional article today in the New York Times. Her basic question itself, first of all, seems a bit outdated given current events on the continent: Why are European poverty and inequality rates less than those in the United States? But regardless, her conclusion is something down the lines that the European elites decided on a political economy based on export promotion coupled with a welfare state tied to regressive taxation, while the Americans opted for a consumption state based on progressive taxation and a high utilization of credit. She calls it mortgage Keynesianism. Both sides were interventionist, she argues, Americans even more so.

OK. This could be a somewhat reasonable starting point but she ends up developing it in a completely regressive manner perfectly inside today’s “balanced” “bipartisan” “centrist” paradigm.

She poses the question of the cause of inequality but then explicitly rejects the most obvious and straightforward answer – that ownership is concentrated in the hands of a tiny few. Is it not that simple? We have inequality because capitalism is a system of inequality. Huey P. Long, she notes, made the obvious question: “This is a land of super-abundance and super-plenty. Then why is it also a land of starvation and nakedness and homelessness?” Here’s her pathetic answer to this most important question:

The true answer to Long’s question — at least as far as we understand it today — is that a restricted money supply was constraining the economy. But observers at the time thought that the problem was that wealth was concentrated in so few hands that consumers did not have purchasing power to buy the goods that lay rotting in the fields..

We don’t have poverty and inequality because of an extreme concentration of ownership, according to Prasad, we have it because interest rates are sometimes too high! What absolute nonsense; but nonsense fitting perfectly within orthodox economics.

One can of course increase consumption without pursuing either “mortgage Keynesiansim” or export promotion tied to a regressively financed welfare state. But to her, these seem to be the only two options. You either expand consumption via credit or do it via welfare while promoting exports. Here’s an example of how she so effortlessly conflates consumption with credit. Notice how slyly she makes the change.

A consumption bias also focuses the efforts of the left on increasing private consumption. It was activists on the left who pushed for greater credit access for African-Americans and women in the 1960s and 1970s, and rightly so, because if credit is how Americans make ends meet, then those without access to credit are economically sidelined. But credit access does nothing for the truly poor, those who are not deemed creditworthy. Someone has to do the consuming, but if one country ends up as the world’s consumer for a long time, as America has, a political tradition can take root that works against the interests of the poor.

She finally concludes her confused argument with this blurb of politically correct centrism:

Pointing out all the ways in which the American government has actually been more interventionist than European governments seems to alarm partisans on both the left and the right. Activists on the right can no longer pretend that American history is about small government. Those on the left are equally alarmed, because pointing out the ways in which the government has been hostile to business can undermine their calls to be even more hostile to business. But poverty reduction is not about hostility to business. It’s about strategies like promoting saving over borrowing. We don’t need regulations as loose as postwar Europe’s, but if reducing poverty and inequality is the goal, we do need to rethink our love affair with consumption.

This type of nonsense is sadly typical of the crap American universities so often produce. Politically acceptable centrism is what gets published in the New York Times and is what promotes academic careers. It does nothing, of course, to promote the general well being of those in the US, in Europe, or anywhere else.